Efficient Market Hypothesis Tests | CFA Level 1 Exam Preparation

Incorrect Summary Point: Kaylee's Second Attempt | CFA Level 1 Exam Preparation

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Question

Kaylee Sumners, Level 1 CFA candidate, is having difficulty remembering the tests for the three forms of the efficient market hypothesis (EMH). On her first attempt to outline the information from memory, she made numerous mistakes. After reviewing the material, she tries again to summarize the information. This time, three of her four points are correct. Which of her summary points is INCORRECT?

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Explanations

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A. B. C. D.

A

Results of trading rule tests, such as filter rules, support the weak form of the EMH.

The other choices are true. Tests show that professional money managers perform no better than a random buy and hold strategy. This supports the strong form

EMH contention that stock prices reflect all information- public and private. (Aside from corporate insiders and specialists, no group has monopolistic access to information that would result in superior returns.)